264 SPECULATION 



cate this state of mind. But it is obvious that it is just as specu- 

 lative to buy cash grain, expecting to hold it for a rise in price, 

 as it is to contract to buy grain in the future, expecting a rise in 

 price. Both transactions give title to grain. Both are based on 

 the belief that the market is too low. The following concrete case 

 illustrates a speculation in cash grain. The Superior (Nebraska) 

 Corn Products Company became a heavy dealer in corn in the 

 spring of 1917. From February on for some months the business 

 was reported as "big." Corn was bought and sold in car lots. 

 Futures were not traded in. On August 18, 1917, occurred the 

 failure of this concern. The cause of this failure was speculation 

 in cash grain, long on corn when the market slumped. This slump 

 occurred on August 8, and continued to August 11, amounting in 

 all to fifty cents a bushel. On Wednesday, August 8, the buyers 

 of this company bought 75,000 bushels of corn by telephone at 

 the closing price of the day before, before the Grain Exchanges 

 had begun the day's trading and wired the new prices to the 

 country. The break began, as noted, and continued four days. 

 This drop in price found this company long 175,000 bushels of 

 cash corn. This meant the financial ruin of the company, and a 

 consequent wiping out of all its assets. The case is interesting as 

 showing that speculation is speculation, whether in cash or future 

 grain. It is also interesting in showing what may happen to a 

 grain business that does not hedge, i.e., protect its cash purchaser 

 by corresponding future sales, and thus avoid speculation by the 

 ordinary use of futures. 



Two Social Classes. There are now, and apparently always 

 have been, and always will be, two classes in society, the conserv- 

 atives and the liberals. That this is true in politics and religion 

 is a matter of common observation. It is equally true in our 

 economic life. Deposits in our savings banks, investments in 

 government bonds, and in other safe and low-interest rate securi- 

 ties show the existence of a numerous class of economic conserva- 

 tives. Many strong bond houses had, before the World War, a 

 large purchasing clientele seeking four and five per cent invest- 

 ments. Safety of principal rather than size of return is the desider- 

 atum with these investors. Other financial houses advertise 

 investments yielding ten or twelve per cent. These investments 

 attract a less conservative group or a group less sophisticated in 

 investment economics. Lastly there is the group of securities 

 with no past record of performance, but with a promised " assured 

 future" of high yields, varying according to the imagination and 



